PCLOB: Section 702 collection 'valuable' — FTC shows it has teeth when it comes to telecom — No pushback against demand letter draft

By Erin Mershon

07/02/14 10:03 AM EDT

with help from Alex Byers and Caitlin Emma

PCLOB: SECTION 702 COLLECTION ‘VALUABLE’ — If you were looking for a brutally critical PCLOB report on intelligence gathering under FISA’s section 702, you’re out of luck. The board’s report, preemptively released last night and set to be voted on today at 10, found 702 collection — the PRISM program and so-called upstream collection via internet backbone companies — to be a helpful tool against terrorism, even if some privacy and transparency tweaks would still help. “The program has led the government to identify previously unknown individuals who are involved in international terrorism, and it has played a key role in discovering and disrupting specific terrorist plots aimed at the United States and other countries,” the report states. http://bit.ly/1o0x0Rw

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—STILL, A FEW RECS: Some aspects of the program push it “close to the line of constitutional reasonableness,” the board says, and could be improved. The board’s recommendations say that the NSA should make written statements outlining why it’s collecting data from a particular foreign target, or why it thinks searching its databases for info tied to an American would have a foreign intelligence benefit — even if there’s disagreement among the board members over whether the latter kind of query should need to win approval from the FISA court. (Josh Gerstein has more on the divide: http://politi.co/1o0yrPQ) And there’s an implication for telecom providers, too: The board says that the NSA and telecom firms need to periodically whether it could improve the technology used to flag communications for intel purposes so it can limit the mistaken collection of domestic communications. More as it comes today.

THE FTC SHOWS IT HAS TEETH WHEN IT COMES TO TELECOM — T-Mobile fired a scathing shot back at the FTC after the agency sued the wireless carrier in federal court over bogus charges on consumer cell phone bills. CEO John Legere called the suit "unfounded" and "sensationalized" and pointed out that it had vowed last November to stop charging customers for the kinds of services the FTC described in its suit. (FLASHBLACK: Your MT'er had the story on that agreement when it happened: http://politico.pro/1jb7E6E) An FTC spokesman tells MT that last year's agreement applies only to so-called premium SMS services — and that their lawsuit seeks to stop cramming "across all forms of third-party billing, not just Premium SMS." The agency's lawsuit comes just as congressional Republicans and others are calling for the Congress to give the FTC more power over telecom companies — especially when it comes to issues like net neutrality. A couple sources tell MT that while the FTC's primary motivation was certainly consumer protection, it's likely not lost on the agency that this will reinforce the jurisdiction they already have over the telecom industry. Your MT'er has the story on the case, here: http://politico.pro/1pUvumG

GOOD WEDNESDAY MORNING and welcome to Morning Tech, where we are still mourning Team USA's loss yesterday to Belgium. (Cheering us up slightly — this video of all 16 of Tim Howard's jaw-dropping saves yesterday, here: http://bit.ly/1pUvdQC.) Help us cope by sending tips and comments over to emershon@politico.com and @ eemershon. And catch the rest of the team's contact info after speed read.

NO PUSHBACK AGAINST DEMAND LETTER DRAFT, BUT NO PUSH EITHER — Rep. Lee Terry unveiled a relatively noncontroversial draft demand letter bill Tuesday that would clarify the power of the FTC and state AGs to regulate so-called patent demand letters sent in bad faith. It earned praise from BSA, the App Developers Alliance and even from groups like the Innovation Alliance, which was harshly critical of legislative efforts for comprehensive patent reform earlier this year. The group believes "such an approach with refinements will address the vast majority of abusive litigation tactics that small businesses and retail interests are facing while maintaining the integrity of legitimate patent enforcement practices for all patent holders," it said in a statement.

Even if they're generally supportive of the bill, though, reform advocates aren't lining up to urge its passage. Some are emphasizing that while the issue is a real and important one, Terry's bill cannot be a substitute for more comprehensive patent reform. "I worry that this limits the power the FTC already has, and I worry that it preempts a lot of what the states are trying to do," Julie Samuels, who heads the startup advocacy group Engine, told MT. "We're encouraged to see this important issue get addressed … but this cannot be a substitute for a more comprehensive reform of our patent laws."

EARNEST: WHOEVER HEADS PTO WILL PROTECT CONSUMERS — White House Press Secretary Josh Earnest didn't comment Tuesday on speculation that Phil Johnson will get the nod to head the PTO, but he did note that when the president nominates leaders for independent agencies like the FCC or the PTO, "the president is entrusting his faith and confidence in that person’s ability to make decisions independently that are in the best interests of the United States of America, and in the best interests ... of American consumers." He added that the president has a philosophy "about what role government can play in protecting American consumers and ensuring that they have a voice in a process that can otherwise be so dominated by influential insiders."

— AND FIRST LOOK: 21C BLASTS THE NARRATIVE THAT IT OPPOSES REFORM: The chatter this week over Johnson's potential appointment has focused on his role with The Coalition for 21st Century Patent Reform, a group made up of major patent holders that several have criticized as "opposed to reform." The group is out with a statement this morning pushing back on that idea, noting that they supported several of the provisions up for debate in the House and Senate over this term — though 21C was clearly advocating narrower patent reform changes than other groups like the Main Street Patent Coalition. They don't say anything about Johnson in the statement, but they do weigh in on ongoing efforts to reform patent laws: http://bit.ly/VDysmz

LEAHY'S NET NEUTRALITY ROADSHOW — Witnesses at yesterday's net neutrality hearing in Vermont took advantage of the many miles between them and FCC Chairman Tom Wheeler and panned his open Internet proposal. Senate Judiciary Chairman Patrick Leahy, who called for the meeting, said Wheeler's plan was “contrary to every single principle that I felt the Internet was based on.” State librarian Martha Reid predicted an Internet where “information is available to only those who have deep pockets,” and Cabot Orton, the proprietor of the Vermont County Store, said he didn’t want to “imagine an America with two Internets,” which might put small businesses “out of shop for good.” Tony's got the story, here: http://politico.pro/1pUqf6j

UK PROBES ETHICS OF FACEBOOK'S MANIPULATIONS — The U.K. Information Commissioner's Office is investigating Facebook after it revealed it had manipulated users' news feeds as part of a psychological study, the Financial Times first reported. Though a spokesman said it's too early to tell what data protection laws Facebook may have violated, the office said it planned to question the company about the experiment and added it would work with the Irish data protection body since Facebook's European headquarters are in Dublin. The story: http://on.ft.com/1pUx8EB

ED GROUPS PAN E-RATE REPORT — Education groups slammed a new FCC report breaking down how states stand to gain from the E-Rate plan Chairman Wheeler put forth last month, calling the report misleading. “After spending this week talking to numerous rural educators, it is clear that the low amounts of per capita funding the chairman proposes to provide rural schools and libraries for Wi-Fi broadband is inadequate for their needs,” said Brian Lewis, who heads the International Society for Technology in Education. “These statewide percentages mask these on the ground realities. The chairman needs to protect rural communities in a final E-Rate order.” Catch the report, here: http://politico.pro/1pHPMUx. And Pro's Caitlin Emma has more on ed groups' disappointment: http://politico.pro/1pHPY6n

— ED COMPANIES PUSH BACK ON NET NEUTRALITY, TOO: Those aren't the only criticisms education folks are throwing at Wheeler. Four online education companies (Codeacademy, CodeCombat, Open Curriculum and General Assembly) all blasted the open Internet proposal, saying in a statement it would allow for-profit schools to "squelch competition and stifle innovation from up-and-comers providing affordable, quality education and job-training to millions."

AEREO PUSHING FOR COPYRIGHT REVIEW — Fresh off its Supreme Court loss last week, the tiny video start-up is asking its subscribers to help it push for a legislative rewrite of copyright law. That's a tall order from a company with only a few thousand subscribers, but it may have help from Sens. John McCain, Jay Rockefeller and Mark Warner, all of whom have supported or offered legislation backing Aereo (though not on the specific copyright issue that derailed the company in its Supreme Court case). "Tell your lawmakers how disappointed you are that the nation's highest court issued a decision that could deny you the right to use the antenna of your choice to access live over-the-air broadcast television,” CEO Chet Kanojia wrote. "Tell them your stories of why having access to a cloud-based antenna is important to you and your families. Show them you care about this issue." Catch his letter, here: http://bit.ly/1pH9M9O

SPEED READ

AMAZON DEFENDS STANCE AGAINST HACHETTE. A senior executive tells the WSJ was simply doing what is "in the long-term interest of our customers." The rest: http://on.wsj.com/1iTxLjp

GOOGLE BUYS SONGZA, PERHAPS FOR OVER $39 MILLION. The search engine giant just purchased a major Pandora rival, and a source tells the NYT that it paid nearly $40 million to do so: http://nyti.ms/1o0GnAG

AN INNOVATION SLOWDOWN? Michael Malone writes in the WSJ that major tech companies are now acquiring the "inventiveness of others" rather than innovating themselves: http://on.wsj.com/1iTzh5d

TWITTER'S REVOLVING DOOR. The NYT looks at CEO Dick Costolo's decisions to place nearly the all the major executives in the company: http://nyti.ms/1iTypNG

MICROSOFT SHIFTS IP STAFF. Re/Code reports that Horacio Gutierrez will oversee legal affairs for Microsoft’s product teams. Erich Andersen will take over his spot as head of intellectual property: http://on.recode.net/1o0GjRF

TWC CUSTOMERS DON'T WANT COMCAST. ArsTechnica sorts through hundreds of comments filed to the New York Public Service Commission asking it to block the deal: http://bit.ly/1o0GAUx

**A message from POWERJobs: The Motion Picture Association of America is seeking a Director of Academic Outreach for its Washington, D.C. office. This person will lead an industry-wide initiative to enhance the association’s outreach to the higher-education community. They will work closely with the MPAA’s six studios and members of the academic community to foster an understanding of the role of copyright in promoting innovation and creativity. Click here for details.**